HEINEKEN WINNING VOLUME AT EXPENSE OF MARGIN IN RUSSIA: ANALYST

Heineken has confirmed to BeverageDaily.com that it will move its Central and Eastern European (CEE) leadership team from Vienna to Amsterdam this summer, to better drive regional growth.

The brewer's staff will move out of Lassallestraße, where the company has an office floor, but a significant number of employees will relocate to its brewery in Schwechat, just to the Southeast of Vienna.

“We announced internally in December that the Central and Eastern Europe regional leadership team and a number of other regional office employees would relocate to Amsterdam in summer 2013,” a Heineken spokesman told BeverageDaily.com today.

“We’ll keep a hub in Vienna, which will be the regional office for our export organization and for the global auditing team,” he added.

More effective relationships

By bringing the leadership team – including CEE regional president Jan Derck van Karnebeek – back to Amsterdam, the spokesman said they would “be more effective in the relationships they have with the global functions based here”.

“It will make it easier for them to work together to drive growth in that region,” he said. CEE is one of Heineken’s five operation divisions worldwide.

Regional office staff staying in the Vienna hub would be considered for other positions within Heineken’s Austrian operating company, the spokesman said, with discussions ongoing as to “how many, if any” would leave the firm.

“The hope is to minimize the impacts, and we’re treating all our employees in line with our company values, and looking into opportunities for them. That’s why we’re not making a big public announcement about this,” he said.

'Heineken are trying to streamline things': analyst

Asked whether he thought the move was surprising or significant, one financial analyst covering Heineken told BeverageDaily.com:“I guess this is part of their whole global business services drive.

“They really are trying to streamline things, so I’m not surprised that these kind of changes are being made. I guess they’re looking at Europe as a whole as opposed to individual markets.

“Is it material? I don’t think there’s necessarily any upside to the cost savings they’ve highlighted as part of the whole TCM or total cost management plan.”

In terms of volumes, Heineken’s Central and Eastern European division was performing well, the analyst explained.

“Essentially what’s happened in Central and Eastern Europe, and now I guess I’m mainly talking about Russia (the bigger market for them in volume terms), is that they lost a lot of volume share because they led on pricing 18 months ago,” he said.

Russian margin pressure

Heineken had tried to win that share back over the last 18 months by being quite aggressive on pricing, the analyst said, and losing out on margin as a consequence.

“From a profitability perspective this division has been quite hard hit actually, in the last rolling year,” he said.

But in H2 of 2012 ending in December, Heineken’s management had said that pricing had come back, and were talking about more rational levels, the analyst added.

“So I think that in H2 we should see some improvement in the profitability of that business,” he said.